• Corpus ID: 41906138

Theory of Product Differentiation in the Presence of the Attraction Effect

@inproceedings{Ok2011TheoryOP,
  title={Theory of Product Differentiation in the Presence of the Attraction Effect},
  author={Efe A. Ok and Pietro Ortoleva and Gil Riella and Gustavo Flausino Coelho and Efeito de Atraç{\~a}o and Teoria da decis{\~a}o and David Schmeidler},
  year={2011}
}
We apply the theoretical model of endogenous reference-dependence of Ok, Ortoleva and Riella (2011) to the theory of vertical product differentiation. We analyze the standard problem of a monopolist who offers a menu of alternatives to consumers of different types, but we allow for agents to exhibit a form of endogenous reference dependence like the attraction effect. We show that the presence of such biases might allow the monopolist to overcome some of the incentive compatibility constraints… 

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